The Budget: what does it mean?

On the back of pressure to hike taxes, South Africa's Finance Minister Enoch Godongwana, kept away from or delayed the announcement of any major tax increases when he delivered his Budget 2024 speech in Cape Town on Wednesday. The Minister's budget speech included South Africa's current economic climate, estimates on expected growth, sin taxes, debt servicing costs, and an extension of the social relief grant.

And, for 3 years now there have been no VAT increases, no direct wealth tax, and surprisingly, no increase in the fuel levy or Road Accident Fund levy.

Leading property management company, WatchProp's managing director, Craig Coetzee, says that what is a concern is the high debt costs facing the country, the downward trend in the growth rate, and the government now dipping into the country's Gold & Foreign Exchange Contingency Reserve Account (GFECRA), which has not been required for 20 years. On top of this, the ongoing energy crisis the country is experiencing adds enormous pressure on businesses, especially small and micro businesses.

Drawing on funds from the GFECRA, the minister hopes to rein in the budget deficit, forecasted to worsen from 4% of GDP to 4,9% in 2023/24, adding more than R15 billion onto our debt-service costs, which remains a concern and a high credit risk for our country. Here we should also mention our port and rail inefficiencies.

Taxpayers have been spared an increase in tax rates, however, with no increases in tax brackets, the inflationary salary increases due to many, may push consumers into a higher tax bracket.

Coetzee says that another concern, especially for homeowners, is that no mention was made of an extension of the rooftop solar rebate for individuals. This means it is the end of the line for a tax break for homeowners installing solar that was announced last year.

There is good news for our pensioners who have been given further relief with the increase of grants to pensioners, war veterans, and the disabled. Foster care, child dependency, and child support grants also increase. 

The biggest losers are, no doubt, the sin taxes with some heavy increases on alcohol and tobacco taxes set to affect smokers and those enjoying a drink or two.

According to Coetzee, consumers are set to remain under pressure for some time still. Inflation pressure, while up and down month to month, will still put interest rate increases on the cards and while it is expected to reduce shortly, the budget announced may slow down a faster reduction in interest rates. 

The community scheme industry will still be required to be prudent with its spending and manage cash flows to protect owners in the scheme. This is essentially business as usual for trustees but with a keener eye on budgets and spending.

For more information contact WatchProp by email info@watchprop.co.za or call 021 914 6660 for community scheme queries or 021 441 8800 for commercial.